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Comment by SwellJoe | Hacker News Reader

I wish this was simply because demand for food-like substances had disappeared and the market was punishing those companies that make predominantly food-like substances, and instead choosing actual food made with recognizable ingredients.

But, it's not. It's mismanagement. I suspect the bankruptcy is simply a method of ending all of the union contracts and moving to factories in right-to-work states in cities without strong unions. It's been done more than a few times in the past few decades by major corporations. That's not to say the unions are all right, just that based on my reading of the situation, they're being used as a convenient scapegoat in a situation caused by long-term mismanagement and incompetence.

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That is not the case here. In fact, they are already in bankruptcy. The judge had imposed a new contract on the union that didn't accept, so they went on strike. The company claims they cannot whether the strike and instead are completely liquidating all assets of the company. They are closing down, not reorganizing.

I'd bet dollars to donuts (or Twinkies) that there will be a new team, made up of a few members of former management at Hostess, who will raise funds and purchase the most valuable assets of Hostess. That team probably already exists, and the private equity company already has the contracts written.

They will then be starting with a clean slate, with only the really valuable assets (the brands, mostly), and none of the baggage of old contracts and agreements.

Of course, another company might buy up those assets, since bankruptcy sales have outside oversight (to some degree), and thwart those plans. But, I'm confident those plans are underway, and would be surprised if it doesn't turn out with some of old management heading up the new company that begins producing Twinkies again.

There is a good chance you are right and this would be evidence that the union was holding out for terms that the market had determined were unsustainable.

If you can start from scratch and lease/purchase/hire what you need under new terms then it is an existence proof that the union had priced itself out of the market (i.e. there were other workers completely willing to accept the new terms). This is true whether the new management is truely a new group of people or simply a new legal entity for the old group of people.

That's a simplistic interpretation (as is mine). Without studying the numbers, the compensation of executives at various levels, the terms of employees, etc. it's impossible to say this business couldn't have continued to run and honored old contracts and satisfied new demands.

It's true that there's often a disconnect in how much unions demand and how much the rest of the labor market demands, and it can lead to businesses preferring to hire in non-union areas (making areas with strong unions suffer economically). I'm not entirely convinced that's the best outcome for everyone (everyone in the city, state, country, world), since it leads to employers holding a disproportionate amount of the power (the corporation becomes the only organized, powerful, force in the negotiation), and employee compensation consistently being pushed downward, while executive compensation often skyrockets. I'm pretty libertarian, so I like market forces, but I think we're seeing evidence that not having some kind of force that opposes corporations having disproportionate power leads to stagnant wages (not keeping pace with inflation), more reliance on government services (when an employer doesn't pay for any benefits, the employees end up relying on various government services for those necessities like healthcare), and a bigger disparity in power. Corporations and states end up having all the power, while individuals (those not lucky enough to have money and influence) end up getting pushed around.

If executives are receiving massive pay increases (which is what happened at Hostess; 300% pay raise, apparently), while the ship is sinking, I'd say there's a lot more than mere market forces at work. I think greed plays a role, too. In a company with some folks making millions, while others are asking for a $1/hour raise, I'm not sure I'm willing to call it merely market forces at work.

The 'disproportionate amount of power' argument comes out a lot in these discussions about unions. It sounds like a good argument but I think it ignores the fact that the labor market itself is a pretty powerful force that works against corporate interests.

Intertwining employment with health insurance has been a big mistake in my mind. Not only does it distort the insurance market in many ways, but it also radically affects job mobility as it artificially binds employment and heath care decisions creating constraints that wouldn't otherwise exist.

Ripplewood Holdings injected $120M into Hostess to allow it to keep operating - what do you bet that $120M is a loan secured by the value of the brand names? It is all private dealing so there is no way to be sure but I am sure Twinkees and Wonder bread will be for sale next year - baked by non-union bakers and delivered by non-union drivers

It's not that simple. When you are in bankruptcy it's really up to the judge to approve who gets paid what.

Hostess proposed an across-the-board pay cut of about 8%, a bump of 3% over the next three years, and a 1% bump in the final (among other things). I highly doubt Hostess is closing factories merely to get out of union contracts. Hostess first went to bankruptcy court back in 2004. This is just the icing on the Ho Ho.

Oh, I agree. It's mismanagement across many years. Of course, those bad managers have received millions in compensation, which I find more than a little distasteful. And, I'll find it even more distasteful, if they pick up the reins at the new company when Twinkies and Ho Hos go back into production.

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